China’s policies often resemble a pendulum swing, rarely settling in the middle. They tend to swing to one extreme, only to reverse when overcorrection becomes apparent. We’ve seen this pattern with Baijiu companies around 2015, and it seems to be happening now with tech stocks. The government’s punitive measures are easing as they realize the tech sector’s importance, especially with the real estate sector struggling. It appears the pendulum is swinging back again.
Well said. Any thoughts on why the pendulum/extremism in policy? I wonder if it has to do with the way these policies are communicated and executed i.e. central government issues order from above, but they get taken to the extreme by regulatory bodies, local governments, etc. that all compete to execute the marching orders.
You’re absolutely right. I would add that the response to policy measures often comes with a significant delay. Initially, changes to new policies might not be immediately evident, so the authorities issue more policies, leading to an accumulation of measures and ultimately a massive overreaction.
The political structure encourages local politicians to follow orders strictly. Overreacting and doing too much (as long as it is in line with central government policies) is often much safer for them than doing too little, as they must pursue the primary goals set by higher authorities. This often leads to overreactions.
Thank you for sharing this article.
China’s policies often resemble a pendulum swing, rarely settling in the middle. They tend to swing to one extreme, only to reverse when overcorrection becomes apparent. We’ve seen this pattern with Baijiu companies around 2015, and it seems to be happening now with tech stocks. The government’s punitive measures are easing as they realize the tech sector’s importance, especially with the real estate sector struggling. It appears the pendulum is swinging back again.
Well said. Any thoughts on why the pendulum/extremism in policy? I wonder if it has to do with the way these policies are communicated and executed i.e. central government issues order from above, but they get taken to the extreme by regulatory bodies, local governments, etc. that all compete to execute the marching orders.
You’re absolutely right. I would add that the response to policy measures often comes with a significant delay. Initially, changes to new policies might not be immediately evident, so the authorities issue more policies, leading to an accumulation of measures and ultimately a massive overreaction.
The political structure encourages local politicians to follow orders strictly. Overreacting and doing too much (as long as it is in line with central government policies) is often much safer for them than doing too little, as they must pursue the primary goals set by higher authorities. This often leads to overreactions.